“We’ve had a recovery that is quite disappointing,” Dallas Fed President Richard Fisher told a group at the University of Texas at Dallas.
But without more certainty on tax policy and regulation, he said, “all the monetary accommodation in the world” will not get businesses hiring again.
The Fed this month said it would buy $40 billion in mortgage-backed securities each month to in an effort to boost employment, and pledged not to stop buying until the labor market improves substantially, as long as inflation remains under control.
The idea behind the program, known as quantitative easing, is to push down borrowing costs for home purchases and other investments, freeing up household cash. With consumers spending more, businesses are expected to boost hiring to meet the demand.
The trouble with that logic, Fisher said on Friday, is that businesses cannot make decisions about hiring as long as tax policy is in the air. Of particular concern is a raft of spending cuts and tax increases dubbed the ‘fiscal cliff’ that looms at the end of the year.
“A short-term fix to the fiscal cliff will do nothing but push out the envelope of indecision and we will continue to be plagued by high unemployment,” Fisher said.
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